Mobile POS companies should become ISOs if they meet the following criteria:

 

1. Have over 1000 merchants
2. See a sizable portion of their merchants being declined by their ISOs’ banks
3. Want to create differentiation
4. Are willing to take risk, and
5. Are willing to understand the merchant acquiring business.

 

Mobile POS Are Frustrated With Merchant Declines

Many of the mobile POS companies are very frustrated because they have to turn down monthly recurring revenues due to the tightening of underwriting that banks have been exercising in the last 18 months.

After creating a good software, spending money launching it, spending money on marketing and getting merchants to sign up for a software that helps them run their business effectively, mobile POS companies find themselves at the mercy of a bank that they don’t even work with directly to approve the account from a payment perspective.

Every decline turns into a loss of a customer due to an aspect of the business the mobile POS company isn’t even responsible for.

 

 

The Advantages for Mobile POS to Becoming ISOs

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1. Eliminating frustrations of merchant declines and developing the reputation of being a merchant friendly company.
2. Gaining a competitive edge from value-add solutions such as incorporating the chargeback processing and reporting within the software.
3. Streamlining and simplifying the merchant statements.
4. Creating a new revenue line from processing.

 

Avoiding the Traps

However, the road to becoming an ISO is full traps and mobile POS companies looking to become an ISO have to evaluate their goal from this move.

The choice of a processor is of big importance, so is the choice of the bank. These two choices need to be carefully evaluated according to the company’s long term growth strategy and should leave enough flexibility to move and scale or even change partners mid-course. That would dictate whether they want to hold their own BIN or not.

Mobile POS companies should also evaluate their appetite for risk. They should evaluate their portfolio and determine where they would draw a line. One bad large merchant can bring a company down, especially if the company is still young.

The servicing of the accounts can also be of importance. That means that a software company has to become also a payment company. It means bring onboard competencies that are not currently available to them. Dealing with chargebacks, dealing with questions over interchange and pricing, etc.

Mobile POS companies need also to learn from the mistakes and benefit from the wisdom of their predecessors. A look at what 10 or 15 ISOs and acquirers are doing definitely helps uncover the traps and optimize the returns.

 

Conclusion

In conclusion, becoming an ISO, especially if a mobile POS company is losing good revenues from declined merchants might be the perfect solution provided they do their homework and get ready for a long road of new knowledge and challenges.